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1 1 (July 3, 2008)

handle is hein.tera/crstax0002 and id is 1 raw text is: Order Code RS22910 Updated July 3, 2008 A CRS Report for Congress The 2008 Farm Bill: Analysis of Tax-Related Conservation Reserve Program Proposals Carol A. Pettit Legislative Attorney American Law Division Summary The 2008 Farm Bill contained two tax-related proposals for the Conservation Reserve Program. One of these proposals, which excludes the payments from self- employment tax, was included in the final bill that became P.L. 110-246. The other, which would have allowed participants in the program to choose to receive a tax credit in lieu of the contracted annual payments, was deleted in the conference committee. Background The Conservation Reserve Program began in 1985 as a program designed to remove highly erodible croplands from current crop production. It was established by the Food Security Act of 1985' and has been expanded and extended by subsequent legislation.' The program provides for annual rental payments to land owners or operators who agree to enroll their qualifying land in the program. Enrollment requires them to remove land from production and, generally, refrain from using the land commercially. They must also follow an approved conservation plan. In return, they receive annual payments. These payments are referred to as rent in the statute, regulations, and contracts. However, from the beginning, the Internal Revenue Service (IRS) has treated this income as self-employment income for those who continued to farm other land connected to the CRP land. Although the IRS initially treated the payments as rental income for those not otherwise engaged in farming, and, therefore, not subject to self-employment tax, that P.L. 99-198, 99 Stat. 1354. 2 For more details on the expansion and extension of the CRP, please see CRS Report RL34457, Conservation Reserve Program Payments: Self-Employment Income, Rental Income, or Something Else? by Carol A. Pettit. See CRS Report RS21613, Conservation Reserve Program. Status and CurrentIssues, by Tadlock Cowan for general background of the CRP and procedures for enrolling land in the program. Congressional Research Service The Library of Congress Prepared for Members and Committees of Congress